Venture hacks always supplies gems for the entrepreneur. This post is excellent, reading and listening for anyone who wants to get a startup done.
Even more important, Mike Cassidy talks about conflict resolution within a company and how to achieve work-life balance. Plus the dude plays ultimate which is a super plus in my book.
All this from a guy who sold hundred million dollar companies twice after only a couple years of launch.
MA just submitted an excellent post regarding dual class structures for companies entering the public market. He has done a complete 180 on his original opposition to dual class share structures. Let’s keep in mind that MA, a serial _successful_ entrepreneur with two home runs (Netscape, at least) and working on a third. His insight is useful for all us entrepreneurs who happen to be lucky enough (<1% or so of us) to have the problem of taking our companies public.
As I was reading through his persuasive series of arguments for why companies with dual class shares may be aligned with long term value creation I began to think about how this could be used as a screen for potentially undervalued stocks. This should be done, although he also brought up counter examples of net value destroying entrenched management/’Arrested Development’ style families using a public company as their personal piggy bank.
All in all, it seems that dual class shares have value to management and as long as the right incentives are in place, there should be enough gummi bears to go around for everyone.
I am not qualified to make any economic forecasts. But I have a gut feeling that over the next decade or so, we will see a substantial movement of left-ish moderates begin to embrace the financial modus operandi of the right. I think there will be a nationwide push to reduce tax burdens. Times are tough right now. If you consider some major factors such as inflation, devaluation of the dollar, the ineffectual fed rate cuts, and toss in a some foreclosures, it looks like you’re gonna have a witch’s brew of stagflation for the upcoming years. And if the belt gets squeezed beyond the last belt-hole, you might get this.
So we’re stuck right? Can’t tax more, yet we’re mortgaging our nation away. I think the way we get outta here is to reinvest in innovation, talent and education before we get to the point that we’re Europe. Let’s get the core of the US excellent again.
Erik passed along a link to an HBR podcast interviewing HBS professor Rakesh Khurana’s take on whether professional business schools should implement a “Green Hippocratic Oath.” The basic idea is to establish a codified set of principles whereby professional business managers seek to maximize corporate and social well being, as opposed to money or profits, through its practices and processes. Professor Khurana’s view is that business school teachings have settled on the notion that students go to business school to develop an elite contact list, obtain a job that pays handsomely and maintains a reasonable moral balance, and then retire and give back after accumulating a large treasure. He continues to argue that concepts pervasive in business school education such as “maximizing shareholder wealth” or “competitive advantage” need to expanded to include “social welfare” and “consideration for environmental impact.” One manner this can be accomplished is through a green oath. There are eloquent arguments for and against such an idea listed in the comments section of the post.
Two points.
1. I personally really like this idea. Dan Ariely, in Predictably Irrational, empirically demonstrated that the effect of an ‘honor code’, a set of rules that fall in line with societal expectations, is a strong reinforcer of behavior. The obtainment of a business management ‘profess’ional degree, as Ariely writes in the book, should require the practitioner to publicly profess their responsibilities as stewards of business and society.
2. I like the concept of integrating ’social good’ and other values into the utility function. Let’s call ‘well-being’ a proxy for money, social welfare, positive environmental impact. Economists have long known that every additional dollar made has monotonically, decreasing added value. If you take the mathematical extrapolation of “maximizing profits” to its limit, there is zero added value created. Clearly the outmoded concept of making a ton of money at the expense of all else is the equivalent of being stuck in a local maxima. Global value [both in a geographical and parameter sense] can be created without being realized only in US dollars [which aren’t that valuable these days anyway]. The practical implementation is obviously completely unclear but the debate and attempts at determining this is worthwhile.
A few months ago, I was up at Stanford University, sitting in on a few of the E-Week events. It included an interesting forum regarding ’social entrepreneurship.’ The forum consisted of the three founders of B Labs, whose goal appears to be the branding and advancing of a new type of corporate structure (B Corp vs. S Corp or C Corp). It is a thoughtful and earnest attempt at creating a ‘badge’ or ‘honor code’ whereby corporations can act in a manner to increase well-being. Check it out. Oh and these guys are responsible for the And1 shoe company, so at least they were responsible for creating highlight reel dunks over the years.
The guys over at Venture Hacks included this little screen shot of John Doerr’s [of Kleiner Perkins fame] recent talk at Stanford University.
We obviously love point 4 under Missionaries. But in truth, as Umair Haque points out often at bubblegeneration, there really does need to be a radical re-thinking of the way we do business. The dollars you hold no longer represent the scorecard at the end of the day. Economists have taken the first step with the concept of monotonically decreasing utility (i.e. not every dollar is worth the same).
In engineering classes like thermodynamics, you are almost always asked to draw a dotted line around what you perceived the system to be. I think it is obvious that for several decades, the US viewed the dotted line as its own borders where flows into the system resulted in a rapid increase in wealth. Now due to reduced friction brought on by inexpensive communication and transportation we see monetary, labor, and political flows out of the US system boundaries. If the US wants to remain relevant, we’re going to have to redraw our dotted line around the whole world.
But this is just a metaphor. If we really want to see this happen, we are going to have to embrace what John Doerr lists as Missionary attributes.